Skip to main content

tv   Book TV  CSPAN  November 27, 2011 10:00am-11:00am EST

10:00 am
that story through the eyes of a survivor and friend, carolyn maul mckinstry. even under the hazardous working conditions, people fought to work at the cotton mill in jacksonville. rick bragg on the day after the mill closed. and on american history tv on c-span3, stanford university history professor jonathan bass on how martin luther king jr.'s letter from a birmingham jail set the tone for the civil rights movement. also a tour of the blast furnace factory that produced iron for nearly 100 years, and tune in as the curator continues with the discussion on birmingham during the great depression. this weekend on c-span2. now on booktv, ellen schultz argues that many large companies have plundered employee pension plans. she also talks about the crisis this has created.
10:01 am
this is just under an hour. >> some years back i went out to iowa, sioux falls, to meet with a group of retired meatpackers. and i don't know what your image of retired meatpackers is, but i suspect most people think they're a pretty tough lot. so i went out to this family diner on the edge of town near a bowling alley where the guys and their wives would get together every month or so over the meatloaf special. they'd say a prayer, they'd read off a list of the people who'd died that month, if any, and they'd get to chitchatting. it's mostly social. but one of the things that kept coming up with them was the struggle they were having because their health benefits had been cut. now, these were benefits they'd been promised decades ago. to give you an example, one of the fellows there named clayton
10:02 am
had started at the hormel meat packing plant right out of high school in the '30s. like a lot of guys there, he left to go to the second world war, survived and came back. then he worked another 30 or 40 years there at the plant. retired to enjoy his remaining limbs and life. clayton was secure. he had a pension he'd earned, he had retiree health benefits. now, these guys were, there were millions of these guys out there, and women. who had earned maybe a trillion dollars in deferred pay which is, essentially, what a pension is. it's deferred compensation. they'd earned pensions, they'd earned health care. in many cases, they were promised death benefits and life insurance. these weren't gratuities, this was pay. now, they retired, and then starting in the '90s mostly they started getting notices telling them, gee, we're really sorry, but we can't afford to pay these benefits. it's just too expensive.
10:03 am
and they pretty much accepted that the companies were struggling. i mean, who questions when companies say retirees are expensive? it's sort of something that seems -- you just can't question it. well, about the time i was meeting with these guys, in washington there was another meeting going on. it was pension experts all getting together to talk about a terrible pension problem they were having. the big problem was there was too much money in pension plans. now, this might seem surprising now with all the talk about underfunded pensions, but at the time, in the late '90s, there was a quarter of a trillion dollars in surplus assets in pension plans. that's $250 billion. what was the problem? well, from the companies' point of view, the problem was it was just a shame, a shame that this money was locked up, company couldn't use it for something. that's because a law had been enacted back in 1974 that said you have to fund your pension
10:04 am
plans, and you have to keep your hands off the money. now, congress enacted this law because through the '60s and '50s there had been many abuses. there were famous debacles like studebaker which went bankrupt, and people lost a lot of their pensions. so congress put 4 law in place that said if you offer pensions which, of course, is voluntary, you have to fund it, keep your hands off, let it grow. now, this law worked so well that by the 1980s there were huge surpluses in many plans. companies like ge which to this day has never put a crept more into -- a crept more into its pension plan. not since the 1980s. well, you had this growing amount of surplus, and then along came a bunch of pension raiders, famous ones, who saw these companies with fat pension plans and said let's kill the, you know, plan off, we'll take over the company, and then we'll be able to take the surplus. so that was going on. you probably heard about this at
10:05 am
the time. lots of companies were being taken over. the pension plan was being killed, and many retirees were losing some of their pension. so, again, congress stepped in and said you can't to that, guys. we're going to put an excise tax on this. you can't take the surplus. so they put that in place. before the ink was dry, employers and their lawyers and consultants were working together to work out how can you get around inconvenience? you know, because they still wanted that surplus. so what people didn't realize was that through the '90s employers had developed a number of ways to tap the surplus assets. one of the most common was during restructurings. they had hundreds of thousands, if not millions, of older workers in their 50s, early 60s who had been at the company decades. they were expensive, they were in their peak pension-earning years, and this was a population you wanted to get rid of. so they used billions of dollars
10:06 am
in surplus to help finance restructuring. now, they didn't use it to pay cash severance because you're not allowed to do that. instead, they called it an incentive benefit of some kind. for example, bell atlantic used $3 billion to get 25,000 of its management employees to leave. and you had a number of companies doing this, billions of dollars were going out of the plants. this was saving the company's cash because they didn't have to come into the corporate coffers to pay for it, they just used pension assets. mean while, you had companies like dupont which had pioneered this technique of taking money out of the plans to pay for retiree health benefits. again, this saved the company cash because they didn't have to reach into the coffers to pay for health care. you had companies taking money out to pay for the restructuring and money to pay for the retiree health. so that's a lot of money going
10:07 am
out the door. to give you an example of how much, bell atlantic which took three billion, then merged with gte and then became verizon and subsequently the company took five billion more out of the plan in the 2000s, again, to pay for restructuring. and, unfortunately, this tendency, this practice was very popular with companies that were in financial trouble. so take the airlines; united and delta, usair. after the september 11th disaster, they were going downhill, and they tapped the pension plans a number of times to take billions out to pay to layoff people. so they were using it for that. gm, ford, delphi, the spin-off. again, they were also taking out billions even as they were headed into disaster. so meanwhile, as this was happening there were yet other ways companies were pulling billions out. the other ways are even harder to find out about.
10:08 am
what they were doing was selling pension assets because in this swirl of mergers and acquisitions, they realized you could actually monetize the assets in pension plans. the way to do it is let's say you're selling a unit. you're going to send over 25,000 retirees and employees, but you send a little extra, maybe 100 million. and the buyer pays you for that, pays you maybe 70 cents on the dollar. so you're happy, you got 70 million free money for that. the buyer's happy because he only paid 70 million for something worth 100 million, so they're happy. so who's not happy? well, the pension plan is less well funded now. so you take this strategy, and there are many permutations of it especially at the defense contractors. you do this any number of times, no one watching it. it's not disclosed anywhere
10:09 am
usually. and you have just buckets of money going out the door for this sort of thing. meanwhile, there was even another way they were taking money out. this was to pay for executive parachutes at a number of companies. in some cases this was a minor amount like royal sun alliance which was an insurer that decided to lay off a bunch of people and, by the way, we're going to give the h.r. folks and the executives some extra money out of the regular plan. now, this wasn't really a legal thing to do, but thanks to a loophole that they developed, they were taking money that was set aside for regular employees and be putting it over on the executive side. so this was going on as well. so you had all of these things happening that were drawing assets out of the plan. people weren't really paying anticipation, though, because the -- attention, though, because the bull market was going on and the assets were rising, so people weren't aware. but, you know, employers
10:10 am
realized this is a really good gimmick, you know, to be able the use the pension plan like a piggybank. so they wanted to, actually, continue to be able to do that. but the way they were able to postpone the impact was to cut benefits. because if you cut benefits, that's more money that stays in the plan that you can pull out and use later for other things like paying executives or selling it. so you had in the '90s these waves of pension cuts that companies like ib m&a t and t, they're the large companies where, again, they had large, older work forces in their peak pension-earning years. now, people didn't know their pensions were being cut because the employers used centrals that were very -- strategies that were very hard for the regular person to perceive. to give you an idea, generally, if anyone figured it out, it was an engineer because engineers are very numbers-oriented. they would get hold of the
10:11 am
plans, the documents, they'd look, and they'd say, well, how exactly is my pension changing? now, you wouldn't know from what the employers told you because they said we're improving the plan. we're going to get rid of this old-fashioned pension plan, we're going to give you a better one. you know, instead of this mysterious formula that, you know, years average pay, we're going to instead give you something that looks like an account, and you can take it with you when you go. so this was going on for years before, finally, enough people figured out what was happening was this formula was a way to hide the fact that their pensions were being cut by as much as 20 to 50%, especially for older people. being cut in two ways. they were not only not growing as fast, but for a lot of older folks the pensions were frozen altogether, sometimes for years. if you think it's a little harsh
10:12 am
to say the companies hid it, i would point you to cigna which found itself in court over this very issue when its retirees sued. because as it turns out, cigna had a number of documents in which they detailed their effort toss keep these practices hidden. they didn't want to provoke an employee backlash, so the idea was we just won't let them know the benefits are being cut. and they celebrated afterwards. they were congratulating themselves on how effective this was because the employees didn't notice. so there was an element of deception throughout this process. so what you're having then are all these companies cutting benefits so they can pull the money out and continuing to pull the money out. but there was another reason that they were cutting benefits even as they had these massive surpluses. they were doing it because of some changes in accounting rules. and this may sound incredibly dull and hard to grasp, but all you really need to know is this: when these accounting rules
10:13 am
changed in the early '90s, it said companies, if you're going to promise pensions, you have this big liability, you have to put it on your books. now, a pension is a debt. so it's like putting a great big debt on the books. so companies did this and, naturally, they were sad at the time because who likes to have a big debt go on the books? but secretly, i think they were thrilled because what happens when you take away some of the debt? you cut a debt, you generate gains. these gains go into profit just like profit from selling trucks or software. so what happened was that suddenly you have this trillion dollars owed to retirees both for pensions, retiree health care, also for lurps and other things -- life insurance and other things, and the plans became cookie jars for companies. they realized if you can cut the benefits, even if they're not costing you anything, even if you're not really planning to
10:14 am
pay them out anyway, if you cut them, you'll get to not only keep the money, which is wonderful, but you'll be able to general rate profit to boost earnings. so what was going on in the '90s and into the 2000s is billions of dollars were being converted into profit for companies. it was going straight into income. at some companies in some quarters, it was the only income they had. companies like lucent, for example. so as this was going on, you could see that the plans were morphing into profit centers. so they were a source of cash, a source of earnings. now, unfortunately for retirees and employees, there was yet another thing going on at the time. this coincided with a shift in executive pay. ininstead of just giving executives great big salaries, companies were changing to more performance-based for tax reasons. so a lot of executive
10:15 am
compensation now was being tied to earnings, you know? if stock went up, so would your bonus. suddenly, executives' pay had a direct connection to earnings. and, of course, executives that were green lighting these moves to cut benefits whether, you know, deliberately or not were boosting their own pay. and we've heard plenty about how pay for executives has gone up so dramatically over the past 15, 20 years. but what was also happening was that as the pay grew, companies were -- executives were deferring it. so companies were, essentially, putting their executive pay on a big credit card. it's no different from a pension liability. so as companies cut pensions for lot of people, the pensions for executives were growing. ..
10:16 am
>> with these two trends you have is almost unstoppable machine where the pensions and health care were waiting to be trimmed, and companies could control when they were taking money out and controlled when they were cutting. and this process enables them to use the plans, essentially tell
10:17 am
the manager earnings. if you need to get your earnings target of 2 cents a share, you know exactly how much to cut on the retiree site to get that 2 cents a share. companies have great control over it because they can choose discount rate, a number of other assumptions to make the debt to go up or down. so this has been going on and it explains a lot of what was happening to retiree plans. and where it came really tragic is with retiree populations. because we've seen how retirees are often very helpless in this process, companies of course were many retirees around because they sold a year or bought a unit. so the retirees have become like a resource for companies. they were like a portfolio. you have the debt, which is what is owed to them, and you had the
10:18 am
assets, which is the money in the pension plan, and sometimes in these retiree health care trusts. its debts and assets. and with this combination portfolio, if you're the buyer now that you this portfolio of retirees, your incentive now is to try to monetize that in some way. so if you want to cut the benefits, you get some profit out of it. so perhaps the country that impressed with the most aggressive ability to do this was decent which was the at&t spinoff. at&t spun off all of its western electric, bell labs and a lot of at&t retirees into lucent back in the late '90s. so we start our this 103,000 retirees, but it also started out with more than enough money to pay for every single one of both health care and attention because they got that, too. but over the years, they started to continually cut retiree
10:19 am
benefits. and they can't get bit by bit here and there, union, salary, everyone was getting hit. by doing that they were keeping a hold of the money, which is boosting their earnings. and that was one company where in many quarters the only income was from retiree benefit cuts. now, this wasn't sort of and equal pain situation. to give you an example, one of the more obvious cuts lucent did was to cut the death benefit. it told the retirees we have promise you, or your predecessor companies promised you this benefit. maybe they promised a key back in 1950 or 60 or 70, whenever, and it's going to be the equivalent of your final years of salary. a lot of people counted on this. they were expecting they would have 30,000, 40,000, whatever their final salary had been.
10:20 am
so what lucent did was tell people we can't afford to pay that. i know that your prior employer promise that you but we just can't afford it. so they cut the death benefit. and people sort of accepted a. i mean, they were unhappy. they figured of course, lucent is struggling. we need to just bite the bull. but the very same year they also paid out 400 million in bonuses. so you have 419 cut from retirees, 400 billion going into bonuses. so this process of cutting retiree benefits and increasing executive benefits was sort of a parallel process. what might surprise people also is the length to which companies have gone to try and finance those executive benefits. one of the things they were doing was using loopholes to tap the regular pension plan to take money out of it to pay for executives. and this has been going on at
10:21 am
many of the major companies, and it's still going on. it's contrary to the intent of congress, which says if you have a regular pension plan you have to treat everyone the same. you can't have like a special deal where someone can come in and get another 100,000 out of it. so this continues to go on. meanwhile, another more colorful effort to finance executive pay, what i was surprised to find was that the companies were taking out billions of dollars in life insurance on their workers, and using the policies as like giant our our ace, like tax shelters they can put a lot of money income it would grow tax-deferred and then ultimately when the retirees or employees or ex-employees die, the death benefit goes to the company. now, some people heard about this back in the '90s because it was going on then, and many
10:22 am
had assumed it's tough. but actually it didn't. it has actually increased. companies have continued to buy billions of dollars in life insurance on employees, and the biggest buyers these days are the banks were buying billion strings of crime -- subprime crisis because executive pay is bigger anything else out there. there are these portfolios of life insurance on workers that can boggle the mind. and if you may wonder how your employer, former employer keeps track of when you die, it's simple. they were just look at the social security death index the comes out every month, do a run, hit all the social security numbers, figure who has died and just put in a claim with the insurer. so this is just to give you an idea of the kinds of things companies have been doing with the plans. and the effort, the effect of
10:23 am
this of course is to constantly put pressure on the retirees but it's too great an impression that the plans are desperate expensive so that expense to retirees why the don't want to continue to pay the benefits, but the plans continue to be very profitable to employers to a lot of the pensions now are frozen, like verizon, dupont, many of these companies, ibm. they have frozen the plan. so they are not growing for anyone anymore. this sort of reached a point where once the markets went down there wasn't enough surplus, not enough asset anymore to protect the plants so they become underfunded. so this was not an accident. it wasn't something that had to happen. the plans have big surpluses. now they are underfunded. and companies continue to lobby for the ability to take more money out of the plan for these various purposes.
10:24 am
usually explained that it is good for retirement security that they have this flexibility. but it continues to have an effect on retirees and employees. to continue to protect their ability to take these assets out, companies have been very aggressive in the court system with finding ways to fight the retirees but try to fight back. so you've seen many cases end up in the court, both over pension cuts which have been challenged by many retirees, and retiree health care cuts. companies have been extraordinarily aggressive with techniques such as suing retirees, especially if the arguing in retirees because they have a contract him and if you have a contract it's a little tougher for the company to just say we're going to discontinue your coverage.
10:25 am
so what they have done is they will sue a retiree, get them into court before a judge that has had some rulings in the past, and try to argue to the judge that you really need to cut the benefits because they are very expensive and a company can't survive without it. and in some cases they use arguments like yes, we promise of lifetime benefits. we didn't mean your lifetime. we meant the life of the contract. so this actually worked with some judges and people lost their benefits. so if you feel somewhat beleaguered, this gives you a backdrop as to what's been going on, and with that i invite your questions, because i suspect you might have some thoughts about some of this. anybody? yes, marta.
10:26 am
>> i'm wondering if, you know, you mentioned this is contrary to the intent of congress. this is not what they meant when they passed erisa and had this before. they're they're trying to protect the plan participant. do you have any sense as to why congress has not acted to clarify either the law or close loopholes? loopholes, that would prevent these kind of practices? >> i think there's been such a strong argument made to congress by employers and retirement industry that these loopholes need to exist, and mind you they don't call them the polls, but these practices need to exist in order for the companies to maintain flexibility. this always seems to resonate, if you go to congress and say look, don't tie our hands with this, don't have burdensome regulation because if you don't let us pull money out when we need it, or put more money in
10:27 am
than we need to when we want to, then we just won't have these plans at all. and that usually is a very effective argument to congress, even though it's not actually true. i hope that helps. >> it doesn't feel good. i understand what you're saying but it doesn't feel good. >> yes, ed. >> and you talk about what kind of research went into your book as far as what documents did you look at, you know, are those same documents available to retiree groups to dig into? >> yes. the only way you can did into this is through documents, because it's not something employers are going to be discussing if you call them up on the phone. and i was initially stymied myself because i couldn't understand why companies were cutting benefits when it billions of dollars in surplus. it just didn't make sense. what led me down the path to
10:28 am
sort of trying to figure it out though was when ibm cut its planned and was telling people it's a better plan now. with a better plan for you, but they're telling shareholders oh, it's going to save us 200 million. and i didn't understand what they meant by that, because like most people i ask them to talk about cash savings, which they were. they were talking about this accounting effect. they were reducing their liability by 200 million in 22 that that is 200 million going to go into your profits either immediately or over time. so the only way to see this happening is if you go into the annual reports, attend? no, which have his pension for death which includes a lot of these numbers that show the size of the liability and the different assumptions they didn't it. so that can give you some idea. it's with the only place you can go for this. >> im from at&t, and we just had
10:29 am
our case get to the appeals court in philadelphia and we lost because just like you described. unit, the engineers, i was an engineer and they said this was the greatest thing since sliced bread. you have more choice spent what company? >> at&t. it was just like that. i was, you know, complaining or voicing my distress at a company meeting. and a couple years later, three years later, somebody came back to me and said you know, i've got to apologize, joyce, you know, back when you talked at that town meeting and said, you know, don't do this, i was looking at my lump sum and i thought it was a lot of money yet and he's like, it hasn't grown. and i guess i want, do you have a comment on, among all the other things being judged -- the judge dismissed our case, they
10:30 am
said that, they let at&t off because they said well, you didn't need to tell them there was a cutting benefits, which they clearly didn't tell us. because that would have been confusing. that's what the judge said. do you have any comments on at&t? >> i've seen a lot of examples of this were companies have resisted making clear disclosures on the grounds that it would confuse people. if you gave in too much information. there is a law, there is a section under pension law, 200 4-h which says that a significant cut in benefits must be disclosed. but as we've seen with companies like cigna, there are ways around that by just ignoring it, for example, or giving people a piece of paper that says your plan is changing these ways.
10:31 am
by the way, 204-h applies. companies said that complies with the requirements of disclosure but it actually doesn't. and in my book i talk about sections where actuaries would discuss how you can avoid providing disclosure. they said well, you could say things are changing, and you can refer to a 204-h but you don't have to use the magic word your benefits are being cut. so, just to use those magic words. so the disclosure issue was clearly at play and a lot of the pension conversions and yet another when you race as what is the lump sum payouts. because a lot of companies at this time began offering lump sums to people saying well, with these new plants we can give you a lump sum, its more modern, now it's portable. that's what these pensions are better for a portable workforce. problem with that, of course, is
10:32 am
the workforce wasn't more mobile. the population they were trying to get rid of was deathly not molder it was people in the 50s who are trying to get to the point where the tension was building to an adequate level. so one of the techniques to get people to agree to leave was to say, if you leave during this retirement window, we'll give you a little extra pinch and we will give it to you in a lump sum so you can take it with you, invested, by a talk of a franchise, whatever. so people very honestly were dazzled by what look like a large sum of money. the problem was though that if you give out a lump sum you can give people less attention than they have earned. normally it's against the law. it's pretty clear under pension law that if you give someone less attention than they have earned you have violated the anti-cutback rule. that's clear. but here's what about sums make it possible. if you give someone a lump sum, say, of 300,000, and the person
10:33 am
has ashley earned about 400,000, well, if they choose to take that lump sum, not knowing that they should have been given 400,000, then they are essentially cutting their own benefit. they are choosing to cut their benefits. legally that is sort of how it works. so you had a lot of people saying the big lump some dollars. not engineers, they can usually figure it out. they would see this big pot of money and they would take it and run not realizing that they're cutting 20%, or as much as another 30% off of their pension. that also was a little disclosure issue. as to the case you are referring to, that's happened with a lot of the suits over the pension changes brought under a ledge in age discrimination. and usually there were two reasons for that. one was under pension law you
10:34 am
cannot have a declining rate of a cruel. that's a complicated phrase. nobody understands it. but in a nutshell it says that you can't have a pension get smaller over time by a certain way. these changes actually did that. when this got to federal court, some judges said yeah, this is clearly a violation of that. other judges said well, you know, why should the pension law apply to these plans? they look like 401(k)s, so why should pension law apply? and actually that succeeded in some circuits your the other element know that always has bothered me more than that even is that this practice of freezing older workers pensions also any deceptive way because people didn't know their pension were being frozen, and the way that work is when you convert the plan, let's say in a traditional pension, it takes your years of service,
10:35 am
multiplies it by your average pay, and let's say that that is worth, in present dollars, $500,000 to that 500,000 represents your 20,000 a month for life, okay, starting at age 65. that's a finite amount, 500. what the difference in people, a lot of people actually, is instead of giving them that 500,000 pounds their opening balance, they would lowball it. they would give them a before hundred thousand. now, since the person getting that balance didn't know the difference, they did know their pension was actually worth five, we'd see the opening balance before hundred and it's okay, that's what my pension is worth. but the trick is this. because you're starting out underwater, your pension is not going to grow until you have enough years of these new pay credits going in to bring it
10:36 am
back up to the level it was when he changed the plan. and encompass like at&t, as you know, for some people that would take as long as their teen years. i talk to woman who was at cigna. she actually was in a pension area so this made it a little more ironic. her pension was cut like that, and she had no idea until she ran into a fellow, an executive at a going away party for someone and he said janice, a few new how much attention had been cut, you would be sick. she said well, frankly i was sick when i figured it out. because for her it would've meant a pension cut for the rest of her career. so people didn't pick up on that, definitely. they didn't understand that just the older people were being frozen. and you may ask yourself, how can it be legal but you can have only older people be affected by
10:37 am
a cut and that younger people. well, that's the magic of pension law. this whole concept called where a way has been banned now under congress. so it can't happen anymore going forward. but having that took place out into the time the law changed a few years ago is teamed with go. i mean, congress finally got up with it and said when i going to do that. but sorry for you at&t folks at cigna folks, it's kind of too late. >> the thing that also really got me when they first did this, that didn't get much publicity, and i think it's legal, but is morally wrong, when we had our traditional pension, you multiply a percent times your years of service, for anyone, someone making 40,000, someone making 100,000, someone making, you know, 200,000, when at&t changed it, they put a and me in
10:38 am
the curve and said okay, you're going to get half the rate up to the social security ratebase, and double the rate. same amount of money in the pie, didn't put more money in there, and i just wanted to say that. so it's doing what you are saying. they got a pot of money and they are skewing it. >> yes? >> i think you are saying many people didn't know they were unaware of this change, and you know, i think that says something interest of retirees of the past were more trusting, et cetera. and i think as the message going forth, you know, i don't think we can have trust anymore with companies. and i think as retirees we've got to be very proactive in this area to protect our earned benefits. your comment? >> i think that when you're
10:39 am
looking at a trillion dollars, there's always going to be a number of people and groups that are interested in participating in that trillion dollars. so for people to just assume that they don't have to pay attention to what's happening to their benefits is naïve. there are so many forces at work that would like to manage that money, take a bit of that money, i forgot to mention the other way the assets were paid out of the plan is they could use the assets also to pay the actuaries and the lawyers who helped them cut the benefits. no way to measure that, but it's probably fairly significant. [inaudible] >> yes? >> two things. number one, i read recently a survey of employers done by one of the major compensation and benefits consulting firms that show the trends of companies dropping health care for
10:40 am
retirees. we've also seen data from the pbgc about the dramatic drop in the number of defined benefit plans that exist anymore. given those two scenarios and what you found, what are the implications going forward for baby boomers, and their pensions and the health care and the postretirement life? >> well, what you say about retiree health and the companies dropping it, you will see that that is not completely true. you will find that companies are dropping it for salaried employees, but it's a little tougher to drop it for collectively bargained employees because there are contracts that are a little tougher to get around to get used other strategies like suing them in a pro-business jurisdiction. so the pattern we have seen is that the first people to go our salaried. like this happen with unisys employs, any number of other companies where the salaried folks who were first look at the door with promises of retiree
10:41 am
health care, and then lo and behold a year or so later they are told no, we can't afford that, sorry. so what has happened now is the retirees have seen their premiums have been going up steeply, incredibly steeply, and that some companies actually one reason they're going up so steep it isn't because the actual costs are going up. because that's the other thing companies are not clear about. their costs are not spiraling. years ago most of the companies put caps on what they would spend. they knew that they would never spend more than x. dollars for population. so people can get as old and sick as they possibly can. and the companies protected from that. what happens is once the cap is reached, all the costs get passed on pixel in the salaried groups your people, they hit that and then the costs go up to people who can't afford it or
10:42 am
have a spouse with coverage, they dropped out of the plant because they can't spend a thousand dollars a month. so what remains are older, sicker people who have no other options. so this creates a classic death spiral where you have increasingly costly group. and is actually benefits companies because the more people who drop out, well, that's people they don't have to pay for. another way that i have seen, another factor increasing these costs is that companies can charge a salaried people more, and some of them do, to subsidize what they have to pay for the collective bargain. don't blame the unions for this produces the company saying will come if we can't get out of paying the union guys, we're going to charge the salaried guys more and we use that access now to pay so we don't have to pay. and, of course, this has a finite life. the all-star to drop out. but we will enjoy it while it lasted so that's a trend i've seen with retiree health care. so the answer to question is, it is unlikely that we're going to
10:43 am
see the same kind of program exist for people now. >> none of us are in a union so we are all getting treated the same way. i think what we're starting to see them as special or at the risk of losing our health care because there's nothing like erisa to protect retirees from losses of health care. so we know we are just at the whim of the company an important force they could decide to drop were caught its health costs in which it has done. will no longer have spouse coverage after 2018, any portion supported by the country. we've been a group that will have one and% of the cost. and secondly, the company's contribution is capped for the retirees. so we are starting to see some of that already spent you mentioned something that is actually quite important. initially, pendulum supposed to cover retiree benefits. including health care, but in
10:44 am
the course during court fights, lawyers have made the argument that health coverage wasn't a vested benefit like pension so they are allowed to change it. and even if they had promised it, as many did in writing, they prevailed in court because they put a little sentence in tiny print somewhere in the document called a reservation of rights clause that says we reserve the right to change our mind simply. so people had no idea this existed and he did note that was all that mattered was whether was the sole cause in a doctor that they were unlikely ever to see. said david the handouts the company gave them, they played the h.r. people to talk to present you will have this. and not realizing a flimsy that promise was. >> i appreciate your comments, and even though it does raise my blood pressure listening to you, i was, my group was included in
10:45 am
your latter example there. the company promises 170 years, and lo and behold, a little clause buried about 300 pages in the tiniest print in the whole booklet is what the federal judge -- >> what company are you with? >> john deere. >> oh, yes. >> and as far as organized labor, they have a larger voice speaking for them than any salaried group, except for salaried unions which are a rarity. >> they do, but actually what's been interesting is seeing how beleaguered they are as well. whether it is steelworkers group, a number of them, manufacturing are constantly fighting, like brush wars with the companies because companies use a bright of tactics which i mentioned in my book, ways to try to get around those contracts with unions.
10:46 am
the songs example i saw was this midwestern company that made tractors and so forth, and back in the early '90s they actually, you know, all got together to really think hard about how they could get out of paying these benefits. so they came up with a variety of tactics. one was to exaggerate the costs and tell people it was really, really costly. and maybe the union would agree to give us some concessions. the other way was to create a unit in spanish off and have it go bankrupt. and then, of course, the retiree health care would be wiped out. the other was what they called creeping takeaways. it works like this. you make a little tiny cut one year, maybe you raised them to buy $5 a month, something like that, you do a couple of these and then a few years later you cut everything for you make a big cut, and if they fight back in court even safe look, there's a precedent here. you obviously accepted these cuts we made, so let's tacitly
10:47 am
have agreed to this year and that worked in a number of venues. and this particular company, it did all of these things, every single tactic. over the years. and the retirees lost bit by bit, although because of the steelworkers union trying to fight to protect it, many of them were actually able to hold on, but other companies, the retirees lost in many occasions. >> for the loyalty that people felt towards their companies, and the companies took advantage of by doing it but by bit and using it in the long run against them, the retiree group when they tried to fight it. >> one of tactics i feel to mention was dragged out the litigation as long as possible. because they will give up or die. and, in fact, they do.
10:48 am
in the book i mentioned a group of retirees with gencorp which was the predecessor was general tire, and this group of retirees saw their pension, retiree health care is cut, and they got together and hired a lawyer and sued. but it took so long, you know, they have to go to court and another utah, they would go to court again, the judge would say, get a broader group of people, one by one they were just dropping off until there was just a few of the original group left. so that has been a successful technique. >> i know that over the years we've all seen problems with their pensions, especially like you, we lobbied heavily for the 2006 pension protection act, which kind of nullified many of the other issues that went on. shortly after that, the
10:49 am
following year there was a ruling that was done that more or less said well, the law wasn't necessarily come with me, it made a very graceful again the corporations have that leeway. also now we know what to look for and we can be aware of it, we've also tried to save it to litigation. it's very difficult for the average retiree to do anything about all the things you're talking about. so is your sql plan on telling us how to -- >> you know what? people are pretty hopeless, the only way that any leverage at all really is to come together with an issue. as i have seen your group do with the bankruptcy issue, horrible situations we have seen with companies stop contributing to their pension plans, airlines for example, u.s. air, and the plan becomes less and less well-funded. and the companies aren't too
10:50 am
thrilled for bankruptcy to dump it on the pbgc which is the federal pension insurer. the problem with that, of course, is the plan is very underfunded and there are not enough assets to pay out the full benefits. people can lose some of their benefits, especially ironically people in the higher income ranges like pilot. pilots were just devastated. they would live up to 80% in some cases other pension because of some other odd quirks in the law. they would also lose all their supplemental savings. so i saw pirates, i mentioned my this in the book he went from having retirement income of around 8000 a month, now living on like 95 a month. pretty perverse. this temptation continues to exist with private equity firms buying companies. it's no different and the raiders of the '80s but it's just a different way to do it. you go in and buy company, if the plan is overfunded, greg. he would kill it and, or
10:51 am
meanwhile, melted, use the surplus. and then later you can kill it. or if it truly unhealthy, you just are contributing to it, let it sink ago to bankruptcy court and say gosh, judge, we can't possibly emerge from bankruptcy with this horrible liability and judges who are equally swayed by this argument, and tragically for retirees they are not first in line. accreditors, other creditors are in front of them. they get paid before the retirees. so the pension gets dumped, retirees are left with a fraction of the pension. and the shareholders are better off. executives and creditors are better off. and just get a flavor of that, last year of the gao came out with a report in which they left at 10 of the largest company bankruptcies in the past five years, and they found that none of these companies which included airlines, polaroid, some others, the companies spent
10:52 am
350 million paying their executives in the run up to the bankruptcy. so just a few short years he for bankruptcy when they're not putting money into pension plans, 350 members going out to the executives at these companies. so this would be probably a good idea if there was something that halted the process or make it tougher for companies to dump the pensions. [inaudible] >> if you have other questions, catcher and i'm sure she will be speech it's a very inflammatory what you're saying. what you think the next step is going to be? are you hiring personal protection? [laughter] you know, are you expecting in terms of company and retiree response speak with one last question. >> okay. none of this is a surprise to employers. i can report on aspects of this
10:53 am
over the past decade, and everything i've reported on, they fought opportunity to correct me, or to challenge. there have been no corrections and they can't challenge it. the numbers are the facts. so it's not like, this would come as a big shock to them. so i think it might do more as a shock to the general public that has evolved this issue. and it would be surprised to hear some of it. >> we will stop here. let's give alan a hand. [applause] >> is there a nonfiction author of book you would like to see featured on booktv? and us an e-mail at or tweet us at >> next from birmingham, alabama, an interview with warren st. john, author of
10:54 am
"outcasts united." booktv visited birmingham as part of our cities tour explaining literary culture of eight different cities across the southeast. >> the foodies are a soccer team, refugees boys from 15 or more countries around the world that have experience conflict and they live outside of atlanta, georgia, a little town called clarkson. they are from mostly african countries but not entirely countries like liberia, burundi, sudan, but also in my book as a young boy from kosovo, bosnia, from iraq and afghanistan. they come through normal refugee reseller programs come united
10:55 am
nations, and then they are passed through to the care of resettlement agencies that handle their relocation and help them get a foothold in this country. there are organizations like the international rescue committee, and other nongovernment organizations. >> how do those programs work exactly? >> basically the agencies get a stipend, or get a budget for refugee families, and the government admits them and and soren hansen over to the care of these agencies, and theoretically the agencies find a home for them, a place to live, try to help them with job placement, possibly language skills. there's a lot of debate about how well the agencies do that. but they're pretty low in resources. there's not a lot of resources given to the organizations that
10:56 am
are resettled refugees in this country. >> tell me about this kind of clarkston george. how does that tell? >> it's a fascinating down. it's a little over a square mile. a perfect circle the town line, it was basically a little suburban town, outpost of a plan with a lot of middle-class families. there are train tracks that rolls right through the we did back in the turn of the 19th and 20th century. in the late '80s and early '90s, resettlement agencies began to place refugees in clarkston for three reasons really. the first was because clarkston had cheap housing. the a lot of apartment complexes that were sort of run down and have some available apartments. the public transportation grid is important is refugee families don't have cars. or the money to buy cars. and then finally it was close to atlanta which, for a long time,
10:57 am
was a big growing, booming economy which could theoretically give these employment. the process of resettlement of refugees is incredibly difficult, incredibly traumatic in the lives of violence. they are placed in a little town, and they don't know the linkage, they don't know the culture. they're given 90 days of government assistance, and it's very, very difficult to i think it's especially difficult for the young people, because they have sense, they go to public schools, a sense that they are different and they know they're sort of outsider in the mainstream culture. they try to adapt, dress like american kids, they learn english, start listening to american music and then they go home and their parents say, what are you doing? we don't dress like that but we don't talk like that. you need to respect working for. they sort of ricochet between two worlds that won't accept and put it on. that's one thing about clarkson,
10:58 am
in this apartment complex you have people from all these different countries that have resettled there. davis can't even speak to each other because they don't know each others' languages, but the children, whether or not they can speak to each other in common language, they have games that they play in common. and that's soccer. soccer game sort of pop up in parking lots, and open lives around the complexes and in the fields around town. it's really, it becomes a sort of public square in the way for people from all over the world to actually interact with one another, despite the fact that they simply have very little else in common. all sorts of things are happening with the fugi's. they purchased a property just outside of town to try to build a school, and the home for the program. there's a lot of information about that on the website which
10:59 am
is fuji they started a girls teen. they have a full-time school for refugee use. so the program has expanded, and continues to impact young people in clarkston. >> how did you first hear about the? >> i heard about the fugi's through just casual conversation with someone who happened to work in refugee resettlement and i was in atlanta giving a talk, had a conversation with a jumper, as can we get for living and he said reseller refugees for the international refugee committee. and as a southerner, someone who grew up in alabama, i was immediately curious how that was going, how this worked to take people from 70 plus countries and put them in a small, relatively small southern town. and overtime, as i begin to learn more about clarkston, i begin to see clarkson as foot every time machine. in a way of looking


info Stream Only

Uploaded by TV Archive on